Major League Soccer invests in Fanatics, signs long-term merchandise deal

Major League Soccer and sports merchandise company Fanatics have signed a long-term deal that gives Fanatics extensive rights to manufacture MLS gear.

Fanatics has had a deal with MLS since 2015, but it was strictly an e-commerce deal: Fanatics was the licensed seller of the jerseys made by Adidas, which is the official on-field apparel outfitter of MLS.

Under the new agreement, Fanatics gets to manufacture MLS merchandise, not just sell it — all items except the official jerseys, and it can still sell those as well. MLS says the new Fanatics deal “complements” the existing deal with Adidas, which MLS extended this year through 2024. Fanatics’ new rights begin in 2019 in the U.S. and 2018 in Canada, where MLS has three teams.

Separately from the new agreement, Yahoo Finance has learned that MLS has invested in Fanatics. This comes after the NFL, NFLPA, and MLB all invested in Fanatics, but was not part of the same round.

MLS declined to comment on the financial details of its investment. Sports Business Journal reported in May that the NFL bought a 3% equity stake for $95 million, MLB bought a 1.5% stake for $50 million, and NFLPA invested $5 million for less than 1%.

Fanatics powers the official online stores of the NFL, NBA, MLB, NHL, MLS, Nascar, and PGA Tour. And it already has the extensive manufacturing rights with NFL, MLB, and NBA that it will now have with MLS.

“We’ve seen a lot of good things in the few years we’ve been working with MLS,” says Gary Gertzog, president of business affairs for Fanatics. “Their new clubs in the last few years have done incredibly well, whether it’s NYCFC, or Atlanta United, and we expect that trend to continue with LAFC next year. At the beginning of the season of a new team, we see a big bump in orders. Atlanta is a great example: they broke the attendance record in their first year, and the excitement from fans was instant.”

(For more on the instant success of the Atlanta team, see the above video of our full interview with MLS Commissioner Don Garber at the Yahoo Finance All Markets Summit.)

What this means for soccer fans

Adidas continues to make the official jerseys, but once the new deal kicks in, Fanatics will be able to make and sell everything else, such as hats, t-shirts, and scarves, which are so popular in soccer. (For some items, Fanatics will license out to third-party manufacturers.)

Fanatics will also be able to make and sell “hot market” gear, items produced quickly around events that just happened. For example, if a surprise player scores four goals in a game, Fanatics can quickly produce and sell a t-shirt referencing the achievement. (In football, an example would be a t-shirt showing New England Patriots receiver Julian Edelman’s acrobatic catch in the Super Bowl last year.) It will also be able to produce “name and number” products, which are exactly what it sounds like: t-shirts with a specific player’s name and number on the back.

“When teams are hot, more often than not they’re running out of merchandise,” says Gertzog. “With our capabilities, we can fill in unexpected demand really quickly. We understand that a lot of demand is unexpected, you don’t know which team will be hot and which players will be hot, so we have to be agile and nimble and ready to move. And frankly, it’s what the leagues and the major teams expect now.”

MLS says its merchandise sales in 2016 were up 21% year over year, reflective of the league’s steady rise. Fanatics adds that its own MLS merchandise sales are up 118% since 2015, when it took over MLS e-commerce.

“You see it more and more in New York,” says Kathy Carter, president of Soccer United Marketing, which is MLS’s commercial arm. “Soccer culture is just culture. People are not as averse to wearing an FC Barcelona or Manchester United shirt or hat, much like a Yankee hat in the international market. Our sport lends itself well to that.”

Adidas has been the exclusive all-team apparel brand of MLS since 2004, but Carter says, “Ultimately we felt like having only one supplier in fanwear wasn’t servicing the fans with a wide array of products. So Adidas is going to focus on the products that the players wear. But now we are building a broader fan gear business.”